America: Pathways to the Present. Chapter 13. The Expansion of American Industry ( )

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1 America: Pathways to the Present Chapter 13 The Expansion of American Industry ( ) Copyright 2005 by Pearson Education, Inc., publishing as Prentice Hall, Upper Saddle River, New Jersey. All rights reserved.

2 America: Pathways to the Present Chapter 13: The Expansion of American Industry ( ) Section 1: A Technological Revolution Section 2: The Growth of Big Business Section 3: Industrialization and Workers Section 4: The Great Strikes Copyright 2005 by Pearson Education, Inc., publishing as Prentice Hall, Upper Saddle River, New Jersey. All rights reserved.

3 The Growth of Big Business Why were American industrialists of the late 1800s called both robber barons and captains of industry? How did Social Darwinism affect Americans views on big business? In what ways did big businesses differ from smaller businesses? How did industrialists gain a competitive edge over their rivals?

4 Robber Barons or Captains of Industry? Robber Barons Business leaders built their fortunes by stealing from the public. They drained the country of its natural resources. They persuaded public officials to interpret laws in their favor. They ruthlessly drove their competitors to ruin. They paid their workers meager wages and forced them to toil under dangerous and unhealthful conditions. Captains of Industry The business leaders served their nation in a positive way. They increased the supply of goods by building factories. They raised productivity and expanded markets. They created jobs that enabled many Americans to buy new goods and raise their standard of living. They also created museums, libraries, and universities, many of which still serve the public today.

5 Social Darwinism According to Charles Darwin all animal life had evolved by natural selection, a process in which only the fittest survived to reproduce. Social Darwinism applied Darwin s theory to society as a whole. It held that society and government should not interfere with relations between workers and employers and should stay out of affairs of business. Those who were most fit in business would succeed and become rich. Society as a whole would benefit from the success of the fit and the weeding out of the unfit. Most Americans believed that government should not interfere with private businesses. As a result, the government neither taxed profits nor regulated their relations with workers.

6 Business on a Larger Scale Many factors combined to make a new kind of business in the United States. Larger pools of capital Entrepreneurs had to invest massive amounts of capital or borrow from investors. Wider geographic span Railroads and the telegraph aided in the geographic expansion of businesses. Broader range of operations Big businesses often combined multiple operations and were responsible for all stages of production. Revised role of ownership Owners had less connection to all aspects of their businesses because the businesses were too large. Professional managers were hired to run their business. New methods of management Innovations were also necessary for controlling resources. Big businesses developed new systems of formal, written rules and created specialized departments.

7 Gaining a Competitive Edge New Market Structures An oligopoly is an industry that is dominated by only a few large, profitable firms. Some companies set out to gain a monopoly, or complete control of a product or service. Some industrialists prospered by taking steps to limit competition with other firms. One way was to form a cartel a loose association of businesses that make the same product. Companies such as Carnegie Steel were able to maintain very low production costs. One reason Carnegie Steel could charge less for its product was a phenomenon known as economies of scale. That is, as production increases, the cost of each item produced is lower. As Carnegie Steel expanded, its cost per item went down.

8 Horizontal and Vertical Consolidation Coke fields purchased by Carnegie Iron ore deposits purchased by Carnegie Steel mills Ships purchased by Carnegie purchased by Carnegie Railroads purchased by Carnegie

9 The Government Response Many Americans who were skeptical of trusts and other large corporations began to demand government action to break up the industrial giants. Despite questions about the practices of the robber barons many government officials did not want to interfere with the captains of industry and their contribution to the country s rising levels of wealth. However, in 1890, Congress passed a law to limit the amount of control a business could have over an industry. The Sherman Antitrust Act outlawed any combination of companies that restrained interstate trade or commerce. This law was vague in its wording and was often used in the courts to aid big business when applied against labor unions.

10 The Growth of Big Business-Assessment How did the theory of Social Darwinism affect the relationship between the government and big businesses? (A) Social Darwinism allowed for much government intervention. (B) The concept of Social Darwinism benefited workers rights. (C) Social Darwinists believed that government should not interfere with private business. (D) Social Darwinists encouraged Congress to pass the Sherman Antitrust Act. A loose association of businesses that make the same product is a(n): (A) cartel. (B) oligopoly. (C) monopoly. (D) horizontal consolidation. Want to link to the Pathways Internet activity for this chapter? Click here!

11 The Growth of Big Business-Assessment How did the theory of Social Darwinism affect the relationship between the government and big businesses? (A) Social Darwinism allowed for much government intervention. (B) The concept of Social Darwinism benefited workers rights. (C) Social Darwinists believed that government should not interfere with private business. (D) Social Darwinists encouraged Congress to pass the Sherman Antitrust Act. A loose association of businesses that make the same product is a(n): (A) cartel. (B) oligopoly. (C) monopoly. (D) horizontal consolidation. Want to link to the Pathways Internet activity for this chapter? Click here!